Tuesday, 19 February 2013

India leads the world in corruption in arms imports and the
gap is widening as we import more and more weaponry. But in taking action
against the guilty we content ourselves with political bluster and
self-defeating bans. Defence Minister AK Antony’s “strong action” against
Italian defence giant Finmeccanica, and its Anglo-Italian helicopter subsidiary
AgustaWestland, is aimed at making him sound like a man of steel but is, in
fact, a short-sighted reaction that is meant to --- but will fail to --- defuse
the opposition’s equally motivated criticism.

Mr Antony has unilaterally “initiated action for
cancellation of contract for procurement of 12 AW101 helicopters for the use of
VVIPs”, by sending AgustaWestland a show cause notice asking why New Delhi
should not cancel the Rs 4,000 crore contract signed in 2010. Just three of the
twelve helicopters ordered have been delivered so far while India has already
paid at least 40 per cent of the contract amount, according to knowledgeable persons,
including former IAF boss, Air Chief Marshal Fali Major.

There is no proof yet of any wrongdoing. New Delhi has acted
on the basis of an investigation report, filed by Italian prosecutors in Milan.
The report alleges payment of Euro 51 million (Rs 350 crore) by Finmeccanica to
secure the Indian contract. The case has not yet come to trial, though the
evidence has persuaded an Italian magistrate to allow the arrest of
Finmeccanica head, Giuseppe Orsi. The Italian judiciary has refused to release
the investigation report; we know of the case only from media leaks, which the
Italian authorities have not denied.

Until there is a conviction by the Italian judiciary, or
until the Central Bureau of Investigation (CBI) determines prima facie wrongdoing (Antony referred the case to the CBI only
last week) any move towards terminating the contract with AgustaWestland would
be legally untenable. On Saturday, the company flatly denied wrongdoing and said
that would reply accordingly to the show cause statement. On what legal basis
then would Antony be proceeding?

Might the CBI succeed in actually obtaining proof of
malfeasance, if it occurred? Going by its record in such cases, that seems
unlikely. The CBI has little expertise on defence procurement, and the agency has
repeatedly proved unable to obtain responses to letters rogatory, investigate
money trails and hawala networks, or
direct investigations towards the influential political figures that are often
the recipients of defence payoffs.

So what might AgustaWestland do if Antony unilaterally
cancelled the contract? If this were the United States --- where the Department
of Defense has the financial clout to ensure that companies like BAE Systems have
paid $400 million fines for apparent bribery --- AgustaWestland and its parent
company, Finmeccanica, might have quietly fallen in line in the interests of
future business. But India’s defence ministry does not have the weight to unilaterally
cancel such a large contract, even though Finmeccanica subsidiaries like Selex,
Wass, Oto Melara and MBDA do substantial business with our import-loving
military. In 2009, Selex Sistemi Integrati (a Finmeccanica subsidiary) dragged
the MoD to court in 2009, charging that the Tata group had been favoured over
Sistemi in a Rs 1,000 crore contract for modernization of air field
infrastructure (MAFI) in 30 IAF bases.

With the AW101 contract four times as large as the MAFI one,
AgustaWestland would almost certainly challenge any cancellation by dragging it
into arbitration. Since the Indian payment for the AW101 is currently ahead of
helicopter delivery, New Delhi would end up a major financial loser by freezing
the status quo. And the IAF would not want to be left with the unenviable task
of operating two types of VVIP helicopters; and sourcing lifetime spares and
overhaul for three AW101s from AgustaWestland.

Such embarrassments would continue for as long as India
remains a major buyer of defence equipment. The only way out of the MoD’s
downward spiral of purchases, scams, cancellations and blacklistings is the systematic
and relentless indigenization of defence equipment. But a militarily and
strategically illiterate MoD has, in the absence of any counter-narrative,
bought into the military’s fiction that if “modernization” were not pursued
(i.e. quick buys from overseas), national security interests would be severely threatened.
In fact, the most serious challenge to our military preparedness is not any
external threat, but the regrettable absence of home built defence systems and
our crippling reliance on rapacious overseas suppliers.

It is time to end all but the most pressing overseas
procurements. The defence ministry needs to form purpose-structured consortiums
of companies --- chosen from both public and private sectors --- and task them
to develop specific defence systems. For example, the elusive chimera of
importing artillery guns must be buried forever. Instead, the government should
task the DRDO’s Armament R&D Establishment (ARDE), Bharat Forge, Tata Power
and L&T to produce a working gun by 2017. The army must be goaded into
working with this coalition, and told its only option is an indigenous gun.

The Make category of the Defence Procurement Policy permits
such consortiums. Only two defence systems are currently being developed under
the Make procedure – a tactical communication system (TCS) and a future
infantry combat vehicle (FICV). There should be at least a hundred.

If operational preparedness suffers in the short or even
medium term, that price must be paid. This strategic decision must be backed by
cross-party political consensus, obtained with an agreement that the network of
industrial structures that will arise from serious indigenization will be
shared across ruling party and opposition constituencies. Ending this spiral of
shameful scandals through indigenization is essential for national pride; strategic
autonomy; and for building the defence capability that must backstop any bid
for great power.

Sunday, 17 February 2013

Italian court rejects Indian request for documents. So on what basis will the MoD invoke the Integrity Clause?

By Ajai Shukla

Business Standard, 17th Feb 13

A day after the
defence ministry (MoD) stated that it had “initiated action for cancellation of
contract for procurement of 12 AW101 helicopters for the use of VVIPs”, the
ministry announced today that it was sending a senior official to Italy to
ascertain facts in the case.

An MoD release
today stated: “MoD is deputing a senior Joint
Secretary to Italy to gather as much evidence as possible relating to the allegations
of corruption in the acquisition of 12 AW 101 VVIP helicopters for Indian Air
Force. The Official, Shri AK Bal, will be leaving for Rome as early as on
Monday.”

The
legal action initiated by the MoD yesterday amounted to the issue of a show
cause notice to AgustaWestland “seeking cancellation of contract and taking
other actions as per the terms of the contract and the Integrity Pact.” The
Anglo-Italian company has been given seven days to respond.

On
Wednesday, the MoD had put all payments to AgustaWestland on hold. With the
show cause notice on Friday, the MoD declared, “The operation of the contract
has been put on hold”.

Questions
are already being raised over the legal basis on which the MoD was proceeding to
cancel the contract, given that the Italian investigation was still ongoing.
Prosecutors in that country have filed an investigation report, but the process
of trial has not even begun. The arrest on Tuesday of Giuseppe Orsi, the CEO of
Finmeccanica (the parent company of AgustaWestland, which sold the AW101
helicopters to India) was carried out based on the investigation report.

Today,
AgustaWestland pointed out that the Indian MoD had only issued a show cause
notice. An official release said, “The Indian Authorities have not cancelled the
contract but have requested some clarifications within seven days. AgustaWestland
is preparing its answer to timely meet the Indian authorities’ request (sic).”

Flatly
rejecting any illegality on its part, AgustaWestland has stated that it “is
confident that the full compliance with the law of its conduct and the conduct
of its past and present Senior Executives and Managers will be demonstrated
soon.”

Giuseppe Orsi,
the arrested CEO of Finmeccanica, headed AgustaWestland at the time the
contract for twelve AW101 helicopters was signed with India.

That the MoD’s
response is more political than legal is evident from the worry within the IAF
and the bewilderment of officials in the ministry’s acquisition wing. Senior
IAF officials are concerned at the possibility of the Communications Squadron,
having to fly VVIPs like the prime minister and the president with just three
AW101 helicopters (which have already been delivered), while a fresh
acquisition process is launched for nine more helicopters, typically involving
a decade-long delay.

The MoD’s
acquisition wing is even more perturbed. Officials say that about 35% of the
total contract payment of Rs 4,000 crore has already been paid. Since just
three helicopters have been received, cancelling the contract at this stage
would involve a significant financial loss.

[Typically, 15%
of the overall amount is paid at the signing of the contract, with the
remaining amount linked to production and delivery milestones.]

MoD officials
also point to the obvious difficulties in invoking the integrity clause at this
stage when the Italian investigation has not yet even come to trial. So far, no
Italian court has found wrongdoing; and the Indian Central Bureau of
Investigation (CBI) has only now been asked to investigate the case.

“The talk about
cancelling the contract is all political. Legally speaking, the MoD cannot
invoke the Integrity Clause against AgustaWestland until either an Italian or
Indian court finds wrongdoing,” says a top IAF officer.

According to the MoD’s lengthy factsheet released on
Thursday, “both the contract and integrity pact signed with M/s AgustaWestland,
U.K., contain specific provisions by which strict action including cancellation of contract, recovery of payment, blacklisting
and penal action can be taken against the vendors. Government is determined
to take all possible legal and administrative action against the guilty parties
and accordingly has ordered a thorough probe by CBI.”

Saturday, 16 February 2013

On November 4,
1977, Prime Minister Morarji Desai was flying from Delhi to Jorhat in an Indian
Air Force (IAF) Russian-built Tupolev-124 jet, when the ultimate emergency
happened: an aircraft with the PM on board lost power, descending dangerously
close to the ground and threatening to plough into the Brahmaputra plain. The
pilot, Wing Commander Clarence D’Lima, and four other crewmembers nursed the
aircraft along, struggling to keep it airborne as they lined up for the
approach to Jorhat airfield. They almost made it; just short of the airfield,
the aircraft hit some trees and smacked onto the ground heavily. Tragically, all
five crewmembers died while making that landing but, thanks to their skill,
Morarji Desai walked out of the aircraft unhurt.

That is the
world of the IAF Headquarters Communication Squadron, which operates from an innocuous
corner of Palam Airport in New Delhi. Formed in January 1947, the Comn
Squadron, as it is referred to, has flown not just Indian prime ministers,
presidents and top cabinet ministers, but also dignitaries like Nikita
Kruschev, Boris Yelstin, Chou En-Lai, Nelson Mandela, Mother Teresa, Jaqueline
Kennedy, the Shah of Iran, Ho Chi Minh, the Dalai Lama, Marshal Josip Tito,
Kofi Annan, John Major, Princess Anne and Ranasinghe Premadasa. Starting with
the venerable Dakota, the Comn Squadron --- whose Pegasus crest bears the motto
“Seva aur Suraksha” --- has flown twelve different types of aircraft. After a
decision in the late 1990s that the old aircraft in its fleet were unsafe, it
now flies a world-class fleet that includes five Embraer-135 BJ Legacy business
jets, bought for Rs 750 crore, which entered service in 2005-06 (12 passengers,
5700 kilometers range); and three Boeing Business Jets, bought for some Rs 1,000
crore, which entered service in 2008-09. These aircraft include the latest
electronic protective equipment and anti-missile counter-measures, of the kind
that protect the US president when he is aboard Air Force One.

While the
business jet purchases gave rise to bitter complaints about “pampering VIPs”,
it is the Comn Squadron’s third aircraft that has created the greatest storm
--- the purchase of 12 AW-101 helicopters from Anglo-Italian company,
AgustaWestland. The Euro 556 million (Rs 4,000 crore rupees at current exchange
rates) contract, signed in 2010, is for eight helicopters in the VIP
configuration and four “non-VIP” helicopters of the same make for carrying
security personnel and equipment.

With just
three of these helicopters having been delivered so far, the contract has
juddered to a halt. On Tuesday, Feb 12, Italian prosecutors in Milan arrested
Giuseppe Orsi, the chairman and chief executive of Finmeccanica, that country’s
second-biggest corporate entity, which reported first half revenue in 2012 of
Euro 8 billion, and which employs 70,000 workers worldwide. That day Italian investigators
also raided the Milan offices of AgustaWestland, a subsidiary of Finmeccanica.
At the heart of the investigation was the question: did senior executives
violate bribery and corruption laws in pushing the sale of helicopters to
India? The allegations relate to the period from 2010, when the contract was
awarded --- and when Orsi was the CEO of AgustaWestland, --- until December
2012.

Why was the
Italian law enforcement machinery bothered about whether bribes were paid in
India, where corruption is well known to be endemic in defence deals? Former
Italian prime minister Silvio Berlusconi, reputedly a path-breaking pioneer in
the realms of political corruption and personal lasciviousness, declared:
“Bribes… are not crimes. We’re talking about paying a commission to someone in
that country… Why, because those are the rules in that country. The fact that
there is risk of (Italian) magistrates intervening I consider to be economic
suicide.”

Berlusconi’s
intervention on behalf of Orsi illustrates the real nature of the ongoing
Italian investigation, which is actually about politics rather than business ethics.
With Italian elections due next fortnight, Berlusconi --- heading the People of
Freedom (PDL) party --- hopes to become kingmaker at the head of a right-of-centre
coalition. For that, he has re-established an old alliance with the right-wing
party, Lega Nord (Northern League), which hates immigrants to Italy as much as
it hates the country’s “corrupt and lazy south”, which supposedly feeds off the
hardworking north. Giuseppe Orsi, the arrested Finmeccanica chief, is known to
be close to the Northern League. For the Italian government, therefore, the
central problem with the payments allegedly made to middlemen in India is not
that there was bribery involved. Rather, it is the belief that Euro 10 million
from the money earmarked for corrupt Indians was funneled back to the Northern
League. In other words, the Italian government is incensed that Finmeccanica
used some of the money (legitimately) charged off for bribing Indian officials
in the AgustaWestland contract, for (illegitimately) funding a domestic
political party, the Northern League.

On Tuesday,
the backwash from this Italian political drama flooded Indian television
screens when the news broke of Orsi’s arrest. Since last year, sporadic
newspaper reports, notably in The Indian Express, have highlighted the ongoing Italian
investigation, causing the defence ministry (MoD) to periodically ask the
foreign ministry (MEA) and the Indian Embassy in Rome for information. But
there was little real follow-up from the MEA; and the MoD itself seems to have
been taken by surprise at the ferocity of the Indian media’s coverage of this
apparent scandal.

Providing a
focus to the media’s fury were Italian investigators’ allegations that a former
IAF chief, Air Chief Marshal Shashindra Pal Tyagi, had been named in the
Italian investigation report as one of the alleged beneficiaries of Italian
largesse. Tyagi, it was alleged, received money through three improbably named
male cousins: Julie Tyagi, Docsa Tyagi and Sandeep Tyagi.

Jumping feet-first
into the blame-game was the political opposition, particularly the BJP, which
wasted little time in pointing to “the Italian connection”, a thinly disguised
swipe at Congress President Sonia Gandhi.

It may be a
leap of logic to compare Finmeccanica’s alleged payoffs to the 1980s Bofors
scandal as the BJP has inevitably done, but there are similarities in how both
cases draw attention to the arms dealer networks that flourish in New Delhi, in
flagrant violation of the government ban on arms middlemen. In addition to
long-existing networks with names like Khanna, Nanda and Choudhrie, foreign
agents have flourished for decades, fatting on the capital city’s cocktail
circuit in apparent disregard of visa regulations or immigration controls. If
Ottavio Quattrochi attained eternal infamy during the Bofors investigations,
two expatriates, Swiss-American citizen, Guido Haschke, and British citizen,
Christian Michel, have been named by Italian prosecutors as key players in
bribing Indian officials.

Christian
Michel, who runs Panama-registered Keyser Incorporated, has never bothered to
hide his profession. In 2004, he actually sued French aviation company,
Dassault, for failing to pay him commission in New Delhi’s Euro 350 million
purchase of ten Mirage-2000 fighters in the year 2000. The French court threw
out his lawsuit, ruling that his agreement with Dassault had expired two years
before the deal was concluded.

Also in the
spotlight is Carlo Gerosa, an Italian who runs a company based in Tunisia.
According to the Italian investigation, a sum of Euro 41 million was to be paid
to these three agents, funneled in from Tunisia against Indian invoices for
software services by Chandigarh-based firm, Aeromatrix. That amount was later
raised by Euro 10 million, with this additional amount diverted to the Northern
League in Italy.

Although these
agents (and others too numerous to be named) operate quite openly in India, it
could legitimately be asked why the government has never taken action against
them. The answer, according to a top government official, is that “MoD
officials, and even political parties, do not want to stop the flow of funds
that comes from these people. This is a gravy train and the money is
distributed widely… to individuals as well as to political parties across the
spectrum.”

For Defence
Minister AK Antony, whose political career rests on a foundation of probity,
the AgustaWestland allegations are a serious challenge. On Friday the MoD
issued an unprecedented 2,100-word “factsheet”, conveying the message that the
key decisions that led to AgustaWestland winning the contract were taken by the
NDA government in 2003, and by his predecessor as defence minister, Pranab
Mukherjee, in 2004-05.

One of the key
decisions that brought the AW-101 into reckoning was: lowering the requirement
of operational ceiling from 6,000 metres (19,685 feet) to 4,500 metres (14,750
feet). The factsheet explains in chronological detail that the decision was
taken in 2003 by the Principal Secretary to the NDA prime minister, who
happened to be the all-powerful Brajesh Mishra. It was Pranab Mukherjee, who was
defence minister from 2004 till October 2006, who increased the numbers from
eight helicopters to twelve.

Interestingly,
the MoD factsheet conveys the undisguised impression that the foreign ministry
(MEA) dragged its feet in pursuing the case with the Italian authorities. In
February 2012, “MoD sought a factual report in the
matter from our Embassy in Rome.” It wrote again to the embassy in Rome in
April 2012, following which the embassy made a formal request to the prosecutor’s
office in Naples. Again in October, the MoD took up the matter with the MEA,
noting in the factsheet that it was willing to take action even on the basis of
press reports. However, clearly, the Italian authorities were blocking Indian
requests and the MEA was unable, or unwilling, to press them harder. Following
the arrest of Giuseppe Orsi on Tuesday, the MoD referred the case to the
Central Bureau of Investigation (CBI) for action.

For now, according to the factsheet, the MoD has decided
to issue a show cause notice to AgustaWestland. It has also “put on hold all
further payments to AgustaWestland. Besides this, the Indian Embassy has been
requested to provide the factual position and any other relevant
information. The CEO of M/s AgustaWestland has also been asked to
categorically state the clear position in view of the current developments
indicating specifically if any financial transaction has taken place with any
Indian individual/entity which would be violative of the Integrity Pact or any other
terms and conditions of the contract.”

The “Integrity Pact”, which is mandated in the Defence
Procurement Procedure (DPP) in overseas defence contracts, permits the MoD to
cancel a contract, recover payment, blacklist a company and take penal action against
a vendor. The MoD says, “Government is
determined to take all possible legal and administrative action against the
guilty parties.” For
now, Finmeccanica and AgustaWestland maintain their innocence. After Orsi’s
arrest on Tuesday, a statement said, “Finmeccanica confirms that the operating
activities and ongoing projects of the Company will continue as usual.” But
with the CBI now on the case, the company is under a dark cloud in India, as in
Italy.

Friday, 15 February 2013

With the
opposition threatening to disrupt the budget session of parliament over
allegations that kickbacks were paid in India in the 2010 purchase of 12 VVIP helicopters
from Anglo-Italian company, AgustaWestland --- and the BJP stating that this
had the “makings of a second Bofors scam” --- the defence ministry (MoD) has
issued a detailed brief that makes public the facts in the case.

Such a detailed
brief is unprecedented from the MoD, usually the most opaque of ministries.
According to the release, the NDA government changed the specifications of the
helicopter in 2003. When reports of irregularities began appearing, the MoD
urged the MEA to take action, but the MEA said it was constrained by Italian
legal processes.

According to the MoD, the
process of procuring a new fleet of helicopters for VVIP travel began in August
1999, when the IAF pointed out that the old Russian Mi-8 helicopters in its
Communications Squadron (which pilots VVIPs) could no longer operate at night
and in bad weather, and to helipads above 2000 meters (6500 feet). To identify
new helicopters, the MoD floated a global tender in March 2002 for eight
helicopters, mandating that they should be able to operate up to 6000 metres
(19,685 feet).

While four vendors
submitted tenders, just one --- Eurocopter’s EC-225 helicopter --- met all the
conditions laid down. At that stage, as Business Standard first reported (“VVIP
helicopter deal comes under CBI scanner”, Feb 13, 2013; and “Brajesh Mishra
loosened norms that let AgustaWestland in: Tyagi”, Feb 14, 2013) Prime Minister
Atal Bihari Vajpayee’s office (PMO) decided to loosen the specifications, a
decision that led to AgustaWestland winning the contract seven years later.

According to the MoD, “On
November 19, 2003 a meeting was taken by Principal Secretary to PM [i.e.
Brajesh Mishra] on this subject. In the meeting, Principal Secretary
observed that his main concern was that the framing of the mandatory
requirements has led us effectively into a single vendor situation. It
was also noted that PM and President have rarely made visits to places
involving flying at an altitude beyond 4500 meters. In the meeting it was
decided to make the mandatory requirement for operational altitude 4500
meters. The higher flying ceiling of 6000 meters, and a cabinet height of
1.8 meters could be made desirable operational requirements. It was
observed that with these revisions, several helicopters which otherwise met all
requirements but had been rejected due to the altitude restriction, would now
come into the reckoning (emphasis
in original).”

The MoD says that Brajesh
Mishra followed up this meeting with a letter to the IAF chief on Dec 22, 2003
“stating that it was unfortunate that neither PMO nor SPG was consulted while
framing these mandatory requirements. He suggested that CAS and Defence
Secretary may jointly review the matter to draw up realistic mandatory
requirements satisfying operational, security and convenience requirements of
VVIPs and also set in motion a fast track process for selection and acquisition
of the replacement helicopters.”

Accordingly, the IAF, NSA,
SPG/PMO and MoD consultatively framed out fresh operational requirements (ORs)
from March 2005 to September 2006. They also decided to add 4 helicopters
in “non-VIP configuration” to the 8 helicopters in VIP configuration “for
security reasons”.

Business Standard
understands that the SPG argued for four more helicopters for carrying
additional security personnel and equipment.

By then, the Defence
Procurement Procedure of 2005 (DPP-2005) had come into effect. Under its provisions,
the Defence Acquisition Council (DAC) sanctioned the procurement of 12
helicopters on Jan 03, 2006, under the “Buy” category. A global tender was
floated on Sept 27, 2006, which mandated that the supplier would have to
fulfill 30 percent offsets.

Since Rosoboronexport did
not deposit earnest money, or a signed Integrity Pact, “their Techno-Commercial
offer was not accepted,” says the MoD. Only the Sikorsky S-92 and the EH-101
were called for field evaluation trials.

Interestingly, the field
evaluation trials were not carried out in India. According to the MoD, “The
Field Evaluation Trial of M/s AgustaWestland was carried out in UK and trials
of M/s Sikorsky were carried out in USA from 16 January 2008 to February
2008. The Field Evaluation Trial team submitted its report in April 2008
and recommended AW-101 helicopter of M/s AgustaWestland for induction into
Service. SPG was also part of the Field Evaluation Trial team.”

[The AgustaWestland
helicopter was called the EH-101 till 2006-07, but known as the AW-101
thereafter].

According to the MoD, the
S-92 helicopter failed on four counts: it did not have a suitable “Missile
Approach Warning System”, which would warn the helicopter pilots about any
missile fired at them; it could operate only up to 4500 metres; it had problems
with its “Drift Down Altitude”; and it could not hover high above the ground.
The MoD says, “Staff Evaluation Report assessed the VVIP helicopter AW-101
to be fully compliant with all SQRs
(emphasis in original).”

From Sept 19, 2008 to 21
Jan 2009, the Contract Negotiation Committee (CNC) negotiated the terms of the
contract with AgustaWestland. During this period, Air HQ, recommended inclusion
of Traffic Collusion Avoidance System (TCAS-II) and Enhanced Ground Proximity
Warning System (EGPWS) for all 12 helicopters and SPG/PMO recommended inclusion
of Medevac System for 8 VVIP helicopters.

Accord to the MoD release,
“The CNC, thereafter, recommended conclusion of the contract at a negotiated
price of Euro 556.262 million.” This is just under Rs 4,000 crore at today’s
exchange rate. The Cabinet Committee on Security (CCS), the final approving
authority for such contracts, approved the purchase on Jan 18, 2010. The
contract for the supply of 12 AW-101 VVIP helicopters was inked with M/s
AgustaWestland, UK on Feb 08, 2010.

The
MoD notes that the contract with M/s. AgustaWestland includes specific
contractual provisions against bribery and the use of undue influence, and
spells out the articles that can be invoked in case wrongdoing is detected. In
addition, the MoD notes that AgustaWestland has signed an Integrity Pact that
is effective for five years from the date of signing, or till the contract is
executed, whichever is later. The penalties include “forfeiture of the
earnest money, performance bond, cancellation of the contract without giving
any compensation, to recover all the sums already paid with interest, to cancel
any other contracts with the bidder and to debar the bidder from entering into
any bid from the Government for a minimum period of five years which may be
extended, etc.”

The MoD release also
details the action it has taken since the first reports of alleged corruption
appeared in the media in February 2012. The day after, “MoD sought a factual
report in the matter from our Embassy in Rome.” The MoD wrote again to the
embassy in April 2012, which sent a “detailed report on the status of the case”
the next month, making it clear “that there are inherent difficulties in
obtaining formal details of the case given the independence of the judiciary
from the executive in Italy.”

Eventually, “A formal
request was indeed made by the embassy to the Naples prosecutors office on July
16, 2012 (emphasis in original).”

The
release notes that “MoD received more than one communication from M/s
AgustaWestland confirming that the statements in the press are “completely unfounded
and have been issued with malicious intent” and that “no commissions whatsoever
were paid” in the case.”

The MoD says that it was
also impressing on the foreign ministry (MEA) the need to press the Italian
authorities on the issue. According to the release, “Defence Secretary wrote to
Secretary (West), MEA, in October 2012 reiterating the importance of the need
to get information from the Italian authorities so that MoD could take further
necessary action in this regard.”

The
MEA responded that the “matter had been taken up with the Italian side and the
position conveyed for the need for ‘reliable information’, for “news reports
alone could not be the basis for the Ministry of Defence to make any
preliminary determination”.

In
October 2012 Defence Secretary also wrote to Secretary (West) to take up the matter
with the Government of UK in view of the alleged involvement of a British citizen
and the fact that the contract was signed with M/s AgustaWestland, U.K. The next
month, “Secretary (West), MEA, replied to Defence Secretary stating that ‘the U.K.
authorities were waiting for the results of the Italian investigation in order
to ascertain whether there are further actions to take’.”

The MoD notes that it was
willing to take action even on the basis of press reports. However, “As soon as
information was available of one concrete step having been taken by the
concerned foreign investigative authorities, namely, the arrest of Mr. Giuseppe
Orsi, CEO, Finmeccanica on Feb 12, 2013. MoD handed over the case to CBI for
investigation and put on hold all further payments to AgustaWestland.
Besides this, the Indian Embassy has been requested to provide the factual
position and any other relevant information. The CEO of M/s
AgustaWestland has also been asked to categorically state the clear position in
view of the current developments indicating specifically if any financial transaction
has taken place with any Indian individual / entity which would be violative of
the Integrity Pact or any other terms and conditions of the contract (emphasis in original).”